Preparation and finance of commercial and near-commercial applications

Sources of finance

Building a project pipeline

Pre-pipeline activities: education and training

Pricing policies and openness to private investment

Pitfalls in implementation

Research and development

(introduction...)

National efforts in the industrial countries

International R&D

Components of a program

Costs

Organization

Conclusions and next steps

Notes

Costs and operational performance

Recent technical developments and reductions in the costs of all
major categories of solar energy technologies have been substantial. First,
consider PVs, for which historical and projected costs (in 1990 prices) are
shown in Figure 2. In the early 1970s the costs of PV modules were several
hundred thousand dollars per peak kilowatt (kWp), and applications were largely
confined to aerospace and other specialized uses. By the early 1980s costs had
fallen tenfold to around $25,00() to $50.000/ kWp, and by 1990 to $6,000/kWp.
and PVs had become commercially viable for a wide range of small scale uses. In
the industrial countries, PVs are often used for telecommunications, cathodic
protection of oil and gas pipelines, and as a source of electricity in homes and
buildings; and in various "luxury" applications. Experiments with PVs as a
source of supplementary grid power are also being conducted in several OECD
countries with positive results. In developing countries, common applications
are for village and domestic lighting, water pumping, battery charging, and
supplies to rural health clinics and schools. The effectiveness of applications
in developing countries is well illustrated in a recent report by van der Plas,
who notes that 20,000 rural households in Kenya have been provided with
electricity from PVs in the past five years - more than were newly supplied from
the grid. An interesting point about this development was that the PVs were
supplied by market vendors at cost (the systems were also taxed), whereas
grid-supplied electricity was subsidized. The engineering and economic data
suggest that further progress can be expected on at least two fronts:

Figure 1. Land Use by Solar-Thermal and
Photovoltaics Versus Land Inundated for Hydropower

· Scale economies and technical progress in production.

World output grew from 1 MW per year 15 years ago to more than 60
MW today, a growth rate greater than 30 percent per year, albeit from a small
base. This is still a small market, but the technologies are modular, and the
economies of scale and the technical possibilities for batch production have
barely been exploited.

· Further developments in cell, module, and systems design,
along with improvements in conversion efficiencies. Development of improved
materials, use of multi-junction devices and novel cell designs to capture a
higher proportion of the solar spectrum, and use of concentrator (Fresnel)
lenses to focus the sunlight onto high efficiency cells are further areas of
rapid development.

The U.S. Department of Energy has projected that with market
expansion, costs should eventually decline to about $2,000 or less per peak
kilowatt (including balanceof-systems costs). If this were to happen, which is
quite plausible, PVs would become economical for use in grid connected
applications in the distribution networks of countries with good solar
insulation's; this level of performance would also favour the emergence of
independent or "distributed" utilities.

Figure 2. Photovoltaic Module Costs.
Actual and Projected. 1970-2015

Progress in solar-thermal schemes has also been noteworthy (Figure
3). They have already been technically proven for large-scale generation, with
costs of $3,000 per kW and 12 to 20 US¢/kWh. Steam conditions compare well
with those of fossil and nuclear stations, typically 1,000 psi and 700° F.
and operational performance is very good. (The availability of the solar fields
in the Kramer Junction plants in California is 99 percent.) Costs are still high
in comparison with fossilfired power stations, though appreciably lower than the
ex post costs of nuclear power plants commissioned in the United States in the
1980s, and they compare favourably with the costs of some hydro schemes in
developing countries. Further, as with PVs, scale economies in manufacture and
technical possibilities have barely been exploited. For example, the central
receiver technologies offer prospects of major efficiency gains and reductions
in costs through a significant increase in steam pressures and temperatures.
Experience with solar-thermal power stations dates only to the mid-1980s, with
only 350 MW having been built.

Research on a range of materials and design concepts is proving
fertile, and ample scope remains for further gains in conversion efficiencies,
from the present 7 to 15 percent range to the 15 to 30 percent range for both
PVs and solar-thermal stations. The potential is especially large in developing
countries, where solar insolations are usually high and energy markets are
growing rapidly. Significant progress has also been made in secondary sources of
solar energy, such as the use of wind and biomass resources for power
generation.

The above developments in solar technologies were much stimulated
by high oil prices in the period 197385 and attracted the interest of several
major companies. The collapse of oil prices in the mid-1980s led some companies
to scale back their investment plans, and in some cases to shelve them, but
those that continued their programs reduced costs by amounts comparable with the
fall in oil prices. Thus, as real oil prices fell by 75 percent between 1980 and
1992 (from $60 to under $20 per barrel), those of PV modules fell by roughly 80
percent. For wind technologies, costs have declined roughly 60 to 70 percent
since 1985 (Figure 4), and for solar-thermal by about 50 percent over the same
period. Nevertheless, low oil and gas prices make it difficult for solar energy
projects to compete commercially with fossil fuels, and presently their main
attractions to private investors and users are for small-scale applications, the
possibility of a commercial surprise, and their promise as an alternative to
fossil fuels should the need arise for environmental or other reasons.

Several other features related to the costs and performance of
solar technologies are worth noting. One is the short lead times, notably for
PVs, solar-thermal schemes, and wind power. Construction times for some of the
solar-thermal plants in California were as low as 9 months, and PV systems can
be installed in yet shorter times. The times typically quoted for wind are
similar to those for solar-thermal. The lead times of biomass-fired power
generation projects are likely to be longer unless they are based on residues or
high-yielding crops (an area of much research interest). Another feature will
likely be the comparative ease and speed of decommissioning once a plant has
completed its useful operational life. For practical purposes, we are dealing
with a "reversible" technology. Finally, solar installations may allow for
"live" maintenance (maintenance while the plant is operating) owing to the
modularity of the plant; this too should help to improve operational performance
and reduce maintenance costs.